The Trump Administration is considering a 10% tariff on aluminum from Canada. That decision could become official by the end of the week.
This is interesting timing, given that the United States-Mexico-Canada Agreement, or USMCA, is set to replace NAFTA in one week. Like many industries, aluminum sales and prices are struggling under coronavirus lockdowns. Now US Trade Representative Robert Lighthizer is concerned about how aluminum imports could further impact domestic industry.
‘I would say there have been surges on steel and aluminum, substantially from Canada, some from Mexico, and it is something that we’re looking at and talking to both Mexico and Canada about,’ Lighthizer told the Senate Finance Committee last week.
Now the United States wants Canada to impose restrictions on aluminum exports. If the Canadian government chooses not to, the United States could respond with a 10% import tax on Canadian aluminum.
The United States agreed to stop taxing Canadian steel and aluminum in a 2019 agreement, albeit with exceptions. The agreement included terms under which tariffs could ‘snap back’ into place. ‘In the event that imports of aluminum or steel products surge meaningfully beyond historic volumes of trade over a period of time, the importing country may request consultations with the exporting country…after such consultations, the importing party may impose duties of 25 per cent for steel and 10 per cent for aluminum in respect to the individual product(s) where the surge took place.’
In other words, if one country believes it is importing an excessive amount of product, it can move to restore duties.
Critics are concerned that this tariff could backfire by imposing additional costs on auto producers, who, after the USMCA goes into effect, will be required to source more aluminum from North America.
The United States currently produces 800,000 tons of aluminum each year, and consumes 6 million tons.